General equilibrium theory - Walrasian approach, input-output analysis, Leontief input-output model, open and closed input-output models, economic policy - monetary, income and fiscal policies - One Line Questions

1. What is the primary difference between a 'closed' and an 'open' input-output model? — A closed model treats all sectors as endogenous, including households and government, while an open model treats final demand sectors as exogenous.
2. What is the 'Leontief matrix' in input-output analysis? — A matrix where each element (a_ij) represents the amount of input from industry i needed to produce one unit of output for industry j.
3. Input-output tables are essentially: — Detailed matrices showing the inter-industry purchases and sales within an economy for a specific period.
4. Which of the following is a key assumption of the basic Leontief input-output model? — Constant returns to scale and fixed input-output coefficients.
5. Monetary policy primarily influences the economy through: — Changes in the cost and availability of credit.
6. What does the 'law of one price' imply in a general equilibrium framework? — Identical goods in different markets will sell for the same price.
7. The effectiveness of monetary policy can be limited by: — The liquidity trap, where interest rates are already very low.
8. The central bank's actions to manage the money supply and credit conditions to achieve macroeconomic objectives fall under which policy? — Monetary Policy
9. Quantitative easing (QE) is a tool primarily associated with which policy? — Monetary Policy
10. Which policy aims to directly control or influence the level and growth rate of wages and prices? — Income Policy
11. The concept of 'money neutrality' is often debated in the context of: — Monetary Policy
12. Wassily Leontief won the Nobel Memorial Prize in Economic Sciences for his work on: — Input-Output Analysis
13. What is the primary tool used in monetary policy to control inflation or stimulate growth? — Interest rate manipulation and open market operations
14. The Walrasian auctioneer is a theoretical construct used to explain: — How prices adjust through tâtonnement to reach equilibrium.
15. A government concerned about high inflation might implement which fiscal policy? — Decrease government spending and raise taxes.
16. If the central bank wants to stimulate borrowing and investment, it would typically: — Lower the reserve requirements.
17. Contractionary monetary policy aims to: — Decrease the money supply and raise interest rates.
18. Expansionary fiscal policy typically involves: — Decreasing taxes and increasing government spending.
19. The Phillips Curve traditionally illustrates the short-run trade-off between: — Unemployment and inflation.
20. Which of the following is a limitation of the basic Leontief input-output model? — It assumes fixed proportions of inputs, ignoring substitution possibilities.
21. If an economy experiences a sudden increase in demand for computers, how would input-output analysis help understand the ripple effects? — It would trace the demand through intermediate sectors like microchip production, metal extraction, and energy, and then to final demand.
22. Who is most famously associated with the development of the general equilibrium theory? — Leon Walras
23. Which economic concept describes the condition where no individual can be made better off without making someone else worse off? — Pareto optimality
24. Which policy aims to influence the overall level of aggregate demand in an economy through government spending and taxation? — Fiscal Policy
25. Which policy directly addresses the distribution of income and wealth within an economy? — Income Policy
26. Budget deficits are a direct outcome of which policy when spending exceeds revenue? — Fiscal Policy
27. Which economic policy is most directly concerned with managing the business cycle through adjustments in aggregate demand? — Monetary Policy and Fiscal Policy
28. An 'open' input-output model includes: — Inter-industry transactions and final demand (consumption, investment, government spending, exports).
29. The concept that a change in one market can affect many other markets is central to: — General Equilibrium Theory
30. Input-output analysis was pioneered by which economist? — Wassily Leontief
31. Input-output analysis is particularly useful for: — Understanding the structural relationships and interdependencies within an economy.
32. Which of the following is NOT a typical objective of monetary policy? — Directly setting wages for all workers
33. A government might use fiscal policy to combat a recession by: — Increasing transfer payments and cutting taxes.
34. In the Leontief input-output model, what does the input-output coefficient (a_ij) represent? — The amount of input from sector i required to produce one unit of output of sector j.
35. If a country's input-output table shows a high coefficient between the steel industry and the automobile industry, it implies: — The automobile industry is a major consumer of steel as an input.
36. What is the primary focus of general equilibrium theory? — The simultaneous equilibrium of all markets in an economy.
37. An example of income policy could be: — Implementing minimum wage laws or wage-price controls.
38. In the context of input-output analysis, what does the 'total technical coefficient matrix' represent? — The total amount of output from each sector required to satisfy one unit of final demand from any sector.
39. The 'tâtonnement' process in Walrasian theory refers to: — The adjustment of prices in response to excess demand or supply.
40. What is the main challenge in achieving simultaneous general equilibrium in a complex economy? — The sheer number of markets and their interdependencies.
41. In a Walrasian system, a surplus of a good implies: — The price will decrease.
42. A 'closed' input-output model assumes that: — All outputs are used as inputs within the system, and there is no final demand.
43. In Walrasian general equilibrium, what is assumed about the behavior of economic agents? — They act rationally to maximize utility or profit.
44. Which of the following is a potential drawback of using wage and price controls as an income policy? — They can lead to shortages or surpluses and create black markets.
45. Which of the following best describes the objective of Walrasian general equilibrium? — To find a set of prices where supply equals demand in all markets simultaneously.
46. What is the main goal of contractionary fiscal policy? — To decrease aggregate demand and control inflation.
47. What is the primary purpose of input-output analysis? — To analyze the interdependencies between different sectors of an economy.
48. What is a primary goal of fiscal policy? — To manage aggregate demand, employment, and economic growth.
49. If the Leontief matrix is denoted by A and the final demand vector by Y, what is the equation for total output X in an open model? — X = (I - A)^-1 Y
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